Inflation Predictions and Buffet's Annual Letter - May 7 to May 12
May 7-May 12, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. The market continues to remain strong, and after a great earnings season, we may be in store for continuation this Summer.
The big news this week will be the April CPI inflation report on the 10th at 8:30 AM. Pre-CPI trading is usually low volume especially as we enter a high chop-zone area.
The million dollar question is what will CPI do this month and how will the markets react? Wall Street is expecting a 5% YoY inflation rate, but the Cleveland Fed is expecting a 5.2% increase in the YoY rate.
The markets are pricing a significant drop in inflation into June, with the expected rate @ 3%. A prediction on Kalshi for core CPI to be above 3.0% by June returns 100% currently:
Last week, we got better than expected jobs data from the Fed and as we know, when unemployment is low, inflation is high as they have an inverse relationship. Higher than expected inflation data will be a double whammy and may increase the need for further rate hikes.
We also got Warren Buffet’s annual shareholder letter stating that America’s economy and it’s “incredible period” is coming to an end. He sold billions worth of US stocks and bought US bonds instead. He stated how he believed that last year will be very different in terms of earnings to this year.
Mentions of weak demand in earnings have soared as well as seen below:
We also closed out most of earnings season with Apple last week. Buffet stated he still loved Apple as a company and their products, and they also announced a $90B buyback during their earnings last week.
#1) Earnings this week should be interesting with a lot of mid cap names reporting. LAZR has had weird options activity on it, OXY is a buffet favorite, ABNB is reporting right before what should be another great travel Summer, and my quantum computing favorite IONQ is reporting. I own shares of IONQ.
#2) On Monday, Boeing may report their monthly delivery numbers. This stock tends to run for days after a good breakout so I’m watching it.
#3) On Tuesday, The Sohn Conference is a conference for small cap stocks to get pitched and I’ll watch for any good companies there as they sometimes jump.
#4) On Wednesday, the main CPI report will release as I mentioned earlier at 8:30 AM. Hindenburg Research also just put out a huge short report on Icahn Enterprises and they will have their earnings call (Hindenburg essentially called them some sort of Ponzi scheme, in my opinion)
#5) On Thursday, the PPI inflation report is releasing and Wall Street expects a 0.3% MoM gain.
The S&P 500 ($SPX index) is about to break out and it looks like it will A key break above our bullish breakout level sets us up for $4300 before our next major move to the downside, if even. The market seems extremely strong as money is flowing into speculative names as well showing this is risk-on as Bitcoin is one of the most risky assets and it’s rising. I’m hoping the market breaks out of this symmetrical break during May and we get a nice continuation move to either side during the summer.
My key breaks are $4170 for bulls and $4110 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
Tesla reminds me of Nvidia before it’s big run this year (it was the #1 name for short seller losses as shorts just kept piling on and it kept running up) and I think Tesla may experience the same thing. Above 170 it has a nice gap to fill to the upside. If it runs it may also take all the EV names with it, so watch PSNY and RIVN as well as they’ve sold off heavily as well.
Apple just reported earnings and announced a huge buyback, as well as Buffet praising it and it’s one of the strongest stocks I see in the market. It’s about to reach this crucial area where we may double top and reverse, but a close over sets us up for $210 and will help the overall market break out.
Lots of speculative stocks have been running and this one is slowly putting in higher lows showing some accumulation. This name randomly runs and it may go this week.
In terms of insider trades, Biotechs had some good ones with KNTE which is just $2 getting huge buys. GTLB which is a software favorite that has sold off also got almost 18M in purchases.
High Short Interest Stocks (Mix of S3 Data and MarketWatch)
#1 - CYTO 87% SI
#2 - SI 71% SI
#3 - CVNA 59% SI
#4- ALLO 57% SI
#5 - BFRG 52% SI
Biotech Stocks Catalyst Watch (from bPiq)
EYEN MicroStat PDUFA decision 5/8
PLX Peg PDUFA decision 5/9
SPRY neffy AdComm docs 5/9 & meeting 5/11
SRPT SRP-9001 AdComm docs 5/10 & meeting 5/12
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)